Expat rates: savers must ensure Greece’s problems don’t become theirs

The Greek crisis is fast becoming a tragedy for the whole of Europe. And for
savers, the debt problems in Greece will yet again concentrate minds on the
safety of the banks we trust to look after our money.

More than ever, it is essential to check that you know where and by which scheme you are covered if the worst happens.

Savers with UK-based banks and building societies are covered by pretty robust depositor protection. If you have money in a UK-based bank, your money is protected up to £85,000 by theFinancial Services Compensation Scheme. However, even that isn’t as simple as it should be because the cover is per banking licence, not per brand.

This means that you need to be careful about having money with several brands that share the same banking licence – for example,Nationwide Building Society is on the same licence as the Derbyshire and Cheshire building societies.

Some banks popular with UK savers, such as ING Direct, are covered by their home scheme – in this case, the Dutch scheme – which covers up to €100,000. Others, such asBank of Cyprus, are covered by the Cypriot scheme, which again covers up to €100,000.

But it is more complicated for offshore savers, and the level of compensation is often lower. If you have money in the Channel Islands or Isle of Man subsidiaries of UK banks, you are not covered by the UK compensation scheme. Instead, you will be covered by up to £50,000 through the Jersey, Guernsey and Isle of Man schemes.

The Irish situation is more complicated still. If you have an account withIrish Nationwide (IOM),AIB International Savings or Bank of Ireland (IOM)– all of which offer some of the top-paying expat accounts at the moment – you are covered by the Isle of Man compensation scheme. But your money is also currently protected by the Irish government. This protection lasts until December 31 2011, although that could be extended.

Rates move again

Fixed rates have moved again – withAlliance & Leicester Internationaland Irish Nationwide changing some of their interest rates. But this time it is not good news as some of the rates have fallen – although there is a sizeable rise in one of the shorter fixed-rate deals on offer.

Alliance & Leicester has left its one-year and five-year fixed-rate deals unchanged, with the latter still offering one of the best deals, at 4.15 per cent. But it has cut rates on its 18-month, two- and three-year deals. The cuts are pretty small – no more than 0.15 of a point – and its two-year deal, now at 3.75 per cent, is still the best buy, even though it has been trimmed by 0.05 of a point.

Alliance & Leicester has also increased the interest rate on its easy-access eSaver Offshore Access Issue 3 and Select Offshore Access Issue 1 from 1 per cent to 1.5 per cent. You can get much higher rates on easy access than this: Nationwide, for example, pays 2.4 per cent and AIB International 2.7 per cent.

Irish Nationwide has changed its fixed-term accounts from days to the more conventional months. Its new nine-month fixed rate pays 3.01 per cent: previously, it was paying 2.7 per cent for 270 days. This is still the best short-term rate, beating Irish Nationwide’s six-month fixed rate of 2.82 per cent. This last rate is higher than the 2.8 per cent Irish Nationwide was paying fixed for 180 days.

Last week, Clydesdale Internationalupped its fixed rates, now offering 3.3 per cent fixed for one year, 3.5 per cent for two years and a chart-topping 4.3 per cent for five years.

These rates are among the best on offer to expatriates. But enthusiasm may be tempered by the news that last week, the onshore arms of Clydesdale International, Clydesdale and Yorkshire banks, also increased their fixed savings rates.

And onshore, you can fix at 4.7 per cent – 0.4 of a point more than offshore. The one-year onshore rate is 3.6 per cent and for two years, 4 per cent – respectively 0.3 and 0.5 of a point more than the offshore versions. The rate gaps can probably be put down to the onshore market being more competitive than the offshore one, where there are just a few providers trying to attract savers’ money.

Charlotte Beugge used tables compiled by Moneyfacts.co.uk in the writing of this article